According to “Taking off the glitz,” Darla Mercado of Investment News says that variable annuities are losing some of the benefits that made them so popular in the first place. Many living benefit features were added and made more attractive last year in order to draw investors into variable annuities. But since low interest rates make it more expensive for insurance companies to offer benefits like lifetime withdrawal benefit guarantees, some of the top sellers of variable annuities are offering less to investors.
Prudential and MetLife are two of the largest variable annuity providers and two companies that are pulling back on their benefits. While Prudential used to base lifetime income on 6% compounded growth, they have lowered that to 5%. They have also increased the amount of time investors must defer their annuity from 10 years to 12 years in order to receive their promised protected value. MetLife has decreased the income annuity associated with the guaranteed minimum income benefit because of low annuity rates.
Advisors are not happy that the benefits they have been pleased to offer investors are being reduced and are looking to new companies for different variable annuities. Ohio National Financial Services Inc. introduced a new 8% simple interest growth lifetime withdrawal benefit, available on your entire original payment. Thomas B. Hamlin of Somerset Wealth Strategies is pleased with the annual reset and 8% growth offered by Ohio National. Transamerica Corp.’s Retirement Income Choice 1.2 rider and their withdrawal benefit are other good annuity choices right now.
The article lists other good benefit options from Protective Life Insurance Co. and Jackson National Life Insurance Co. It is suggested that Jackson may move up to be the top seller of variable annuities now. MetLife and Prudential still have a lot to offer in the variable annuity market as well, even with trimmed down benefits. The moral is that variable annuities are not “one size fits all” and really must be customized to the individual investor and their needs.